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SCOTUS Isn't Going to Drop Hammer on So-Called PTAB 'Judges'

I like to make predictions based on oral arguments. Of course I have no crystal ball. It's guesswork. I don't even know if the justices know yet how they're going to vote. But there are always clues.

Based on what I'm hearing following Monday's arguments in Oil States v. Greene's Energy, a lot of lawyers are reading the clues differently. Savvy lawyers are predicting everything from a unanimous affirmance keeping IPRs in place to a lopsided reversal declaring them unconstitutional.

Some people—maybe including me—are going to be surprised when this opinion comes down. But here's my take.

Much of the argument went according to script. Justice Neil Gorsuch, an established critic of the administrative state, led the charge in favor of patent owner Oil States Energy Services LLC. Gorsuch quoted from McCormick Harvesting v. Aultman-Miller, the 1898 Supreme Court decision that said only courts can annul a patent. “We have a number of cases that have arguably addressed this issue already,” Gorsuch said, hedging just a little with the “arguably.”

Somebody told Chief Justice John Roberts that the PTAB has stacked panels with extra judges on a few occasions. He brought up the subject repeatedly, as did Gorsuch. (Deputy SG Malcolm Stewart protested that this had happened “only one or two times,” later amending to three.) So indignant was Roberts he dismissed the idea of the PTAB having a chief judge. “When we say 'judge,' we usually mean something else,” he harrumphed.

So I could see those two voting to shut down IPRs. But I didn't hear much support from anyone else.

Justice Clarence Thomas, of course, doesn't ask questions. (He's a critic of the administrative state, but he's also said that patents are not core private rights.) Justice Samuel Alito said very little, though he did get Oil States counsel Allyson Ho of Morgan Lewis to concede that Congress was under no obligation to create a patent system at all. I'd rate Thomas and Alito coin flips at best.

If everything breaks right for Oil States and all four of those justices are in fact votes to shutter IPRs, then it does get interesting. Justice Anthony Kennedy came out guns blazing against Oil States, telling Ho the Constitution makes plain that patent owners have “limited expectations as to the scope and the validity of the property right.”

But Kennedy also had a couple of brief but sharp questions for respondent Greene's Energy Group LLC and the government. When Stewart assured the court that panel-stacking had been de minimis, Kennedy replied, “Suppose it were rampant?”

So I rate Kennedy a coin flip with Thomas and Alito. If all three come up heads, then maybe Oil States has its majority. But I doubt it.

I sure don't think any help is coming from the court's more liberal wing. Right out of the gate, Justice Ruth Bader Ginsburg got Ho to concede that previous PTO methods of reviewing issued patents are constitutional. That seemed to frustrate Gorsuch, who encouraged Ho to “stake your ground” that any reexamination procedure would be unconstitutional under McCormick. “I think Ms. Ho conceded that there can be a re-examination,”Ginsburg replied.

Justice Elena Kagan noted repeatedly that IPRs are subject to Article III judicial review on appeal to the Federal Circuit. Justice Sonia Sotomayor said that's what “saves” IPRs in her view.

After the argument I got an email from Marshall Schmitt of Michael Best. He expects a majority to reject Oil States' constitutional challenge. But, he adds, “Whatever the final vote, there is a likelihood of multiple opinions to ensure that the decision does not in the minds of certain justices unduly expand the power of the Executive Branch.”

That sounds right to me.

➤ No Questions About Potential Fallout

There wasn't a single question along the lines of, “If we find IPRs unconstitutional, what happens to all the patent claims previously canceled via IPR?” I know the Supremes like to leave pesky details like that to the lower courts, but the absence of any such questioning is another reason to doubt a decision striking down IPRs.

➤ Pharma Gets Snubbed

There wasn't a peep about pharmaceutical patents. No mention of the controversy over hedge fund short-selling tactics or branded pharma's amicus arguments that generics are using IPRs as an end-around around Hatch-Waxman. Justice Stephen Breyer did raise concerns about a hypothetical company that invests $40 billion over 10 years on a patented product, only to lose the patent in an IPR. Maybe that was code for pharmaceutical companies. But in any event, he answered his own question by saying such a claim should be raised under the taking clause or the due process clause.

➤ What Seventh Amendment?

Not a single justice uttered the words “jury” or “Seventh Amendment.”If Article III courts are going to be declared the sole forum for determining patent validity, I'd think there would have been some discussion of the jury's role.

➤ Needling Justice Gorsuch

Did anyone else get the feeling that Breyer was needling Gorsuch a couple of times? At one point Breyer told Ho “it's the most common thing in the world” for government agencies to adjudicate matters involving private parties. “So what's special about this one, or do you want to say it isn't special and all the agency proceedings are unlawful?” Breyer said. He refrained from adding “like the crazy guy to my left.” Gorsuch also referred to “that wonderful quote from Justice Story indicating that any correction to a patent has to go to a court.” Breyer said that theory “might have moved Justice Story but in fact has happily sunk from sight.”

➤ Taking It All In

From the press gallery I didn't get a good look at everyone in attendance. But PTAB “Chief Judge” David Ruschke was there, as was Covington & Burling partner Scott Kamholz, who presided over the Oil States case when he was a judge — excuse me, an administrative judge — at the PTAB.

Also on hand was Orrick, Herrington & Sutcliffe partner Mark Davies, who who broke down the arguments with me Tuesday in Skilled in the Art's first IP law conference call. My thanks to Mark and to all of you who dialed in to listen.

➤ In Closing

There's a lot going on in the IP world beyond Oil States, including today's Senate confirmation hearing for PTO nominee Andrei Iancu. I'll be back Friday to wrap it up. In the meantime, a tip of the cap to the hardy patent lawyers who lined up in the wee hours for Monday's arguments. Ropes & Gray counsel Matt Rizzolo sends along this evidence that the line stretched around the block by 6:40 a.m.

If you like Skilled in the Art, check out more new briefings from Law.com.